Ambarella (NASDAQ:AMBA) is riding the growth of the increasing application of cameras in various applications. The company expects solid growth for its high-definition camera segment in the second half of the year as the consumer continued to appreciate the benefits of hands-free cameras with great video quality and the wireless connectivity.

Ambarella also foresees opportunities in the new UAV or quadcopter markets as manufacturers look to offer integrated HD camera solutions. Ambarella provides cameras SoC-based solutions for video cameras recorders for dash cams for its automotive aftermarket and is primarily sold to Russia, China, Taiwan, and South Korea.

Strong momentum

At the China Sourcing Fair, several OEMs introduced new product based on Ambarella’s A7LA SoC solution, including new features such as high dynamic range, Wi-Fi and two–channel camera operation. Ambarella demonstrated its latest MotorVu’s Super HD reference design, which incorporates full exposure, high dynamic range as full HD resolution to significantly boost best camera visibility in real low conditions.

Looking at the end markets

Although there is an economic challenge in Russia and the competitive price pressure at a low end in China still, Ambarella is successfully driving the adoption of cameras with higher image quality and more advanced features and has new design wins with leading brands in Korea, Japan and Taiwan in addition to existing Chinese customers.

Finally, there’s strong momentum in all of Ambarella’s camera markets, including IP security, sports and automotive cameras. Ambarella’s introduction of S2L camera SoC extends its leadership in the security market and helps it define a feature over the next generation of internet-connected home security cameras.

The professional and consumer IP security market of Ambarella was the key driver of year-over-year revenue growth, ending the quarter as the largest camera segment based on both revenue and units. The sequential and year-over-year growth in security reflected the increase in revenues from customers added since Q1 of last year.

Ambarella’s president and CEO, Fermi Wang, believes that the expanding markets for innovative, high definition professional and consumer cameras will continue to give it the opportunity to grow its revenues in the year ahead.

Conclusion

The trailing P/E and forward P/E ratios of 29.03 and 16.88, respectively, of Ambarella indicate robust cost-cutting efforts by the company. However, the P/S ratio of 4.54 is above the industry’s average of 1.77, depicting that the stock is overvalued. In comparison, its competitors like Fujitsu Limited, Intel Corporation, and Texas Instruments have lower P/S ratios of 0.30, 2.57, and 4.12, respectively.

The profit margin is stable at 16.28%. The revenue per share and diluted EPS of $5.69 and $0.85, respectively, look weak. The quarterly revenue growth and quarterly earnings growth of 26.80% and 51.90%, respectively, show healthy earnings growth, above the industry’s average of 7%, and above competitors like Intel Corporation and Texas Instruments' figures of 2% and 3%, respectively. The current ratio of 6.98 shows robust current assets for Ambarella. Therefore, investors are advised to hold the stock and expect handsome returns in the long-run.

Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC.
Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.